April 03,2008

Baucus Floor Statement on Housing Tax Provisions

Mr. President, Dickens wrote:

“Home is a name, a word, it is a strong one; stronger than magician ever spoke,
or spirit ever answered to, in the strongest conjuration.”

Mr. President, simply put, we are here today to help families to keep their homes.

We are here today to move a package of tax provisions that will help those families to
keep their homes. Our package does so with tax relief for homeowners, for homebuyers,
and for homebuilders. We are offering this Finance Committee tax package as part of the
consensus amendment being assembled by the two Leaders and Senators Dodd and
Shelby.

Today, many American families find that their home is threatened. A weak housing
market has spread weakness throughout the larger economy. More than five million
households now owe more than their house is worth. That’s about one out of every ten
home mortgages. And as home prices fall, that number is expected to grow.

Our tax package seeks to stabilize the housing market by providing temporary, targeted,
and timely tax relief for the housing market.

We have developed a consensus package that is limited to four provisions. These
provisions focus solely on our ailing housing sector.

The Finance Committee passed the first two provisions earlier this year, as part of the
economic stimulus package.

First, our package increases the number of mortgage revenue bonds. Mortgage revenue
bonds are tax-exempt bonds issued by state and local housing finance agencies. With the
proceeds, those agencies can extend mortgages to homebuyers at interest rates below the
market rate.

This will help homeowners to avoid foreclosure. And it will increase first-time home
purchases.

Mr. President, the subprime and affordable mortgage markets have virtually collapsed.
As a result, demand for mortgages financed by housing finance agencies is increasing.

State housing agencies can respond immediately to growing risks of foreclosure. These
agencies can issue more mortgage revenue bonds. That can provide states the option to
refinance subprime mortgages. And additional mortgage revenue bonds can help clear
out the glut of existing homes on the market through first-time home purchases.

Our proposal includes a second provision that the Finance Committee passed earlier this
year. And that’s extending the carry-back period for net operating losses — or NOLs —
from two years to four years.

Generally, cyclical businesses have profitable years, followed by loss years. During a
loss period, a company will carry back the net operating losses from the loss years to the
prior profitable years. They will file a quick refund claim. The quick refund claim will
act as a cash infusion that can allow a company to survive a loss period.

The housing industry, in particular, would greatly benefit from an increased NOL carryback
period. The expanded period would allow builders to avoid selling land and houses
at distressed prices. And it would enable less-costly financing.

An increased NOL carry-back period would improve business conditions for the eventual
return of the housing market. And the expanded period would give the housing industry
cash to meet payroll. And that would limit additional job losses.

Third, our proposal provides broad-based tax relief for low-income individuals and those
who have already paid off their mortgages. Under our proposal, homeowners would be
allowed to deduct local real estate property taxes from their Federal tax return, even if
they don’t itemize. According to the Joint Committee on Taxation, more than 28 million
taxpayers pay property taxes but don’t itemize.

Our proposal would provide these 28 million taxpayers a deduction for the amount of
their property taxes, capped at $500 for individuals and $1,000 for married filers.

Most often, non-itemizers are low- or middle-income people. Our proposal would also
benefit those who are not likely to itemize because they have already paid off their
mortgages. Senior citizens would benefit.

The Congressional Research Service estimates that nearly 130,000 property tax payers
could benefit in my home state of Montana alone.

Fourth, our package provides a homeownership tax credit for purchases of homes subject
to foreclosure. Behind each foreclosed property is a family kicked to the curb. And the
suffering does not end there.

Foreclosed and vacant homes are a blight on the neighborhood. They drag home prices
down. They are targets for vandalism and burglaries. Congress should encourage people
to purchase these properties. And that will help to stabilize home prices and get the
housing industry back on track.

Our proposal provides a one-time credit for taxpayers of $7,000. The credit would be
claimed over two years. And the home purchase would have to be made in the following
12 months. The short-term nature of this credit is critical to providing immediate
stimulus. And it also ensures that we do not over-subsidize the housing industry or
exacerbate the current oversupply of residential homes.

This focused package of four proposals will go far to address the housing downturn and
economic weakness in our country. I am proud that we could come together on it. And I
hope that the Senate can pass it into law expeditiously.

A lot of irresponsible actions led to the housing crisis. But now a lot of responsible
homeowners, homebuyers, and homebuilders are caught up in it. Tax relief and mortgage
help for folks who are playing by the rules in the housing market is the right thing for
Congress to do.

The tax provisions in this package will keep property values up, keep folks in their
homes, and keep businesses afloat. And those are all keys to handling the housing crisis.

And so, in sum, this is an effort to provide tax relief for homeowners, homebuyers, and
homebuilders. This is an attempt to help families to keep their homes. And this is an
effort to preserve an important word, stronger than any magician ever spoke, or any spirit
ever answered to — the word called “home.”

I urge my Colleagues to support the package.

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